US oil exports boom, putting infrastructure to the test

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Updated 30 October 2017
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US oil exports boom, putting infrastructure to the test

NEW YORK/HOUSTON: Tankers carrying record levels of crude are leaving in droves from Texas and Louisiana ports, and more growth in the fledgling US oil export market may before long test the limits of infrastructure like pipelines, dock space and ship traffic.
US crude exports have boomed since the decades-old ban was lifted less than two years ago, with shipments recently hitting a record of 2 million barrels a day. But shippers and traders fear the rising trend is not sustainable, and if limits are hit, it could pressure the price of US oil.
How much crude the United States can export is a mystery. Most terminal operators and companies will not disclose capacity, and federal agencies like the US Energy Department do not track it. Still, oil export infrastructure will probably need further investment in coming years. Bottlenecks would hit not only storage and loading capacity, but also factors such as pipeline connectivity and shipping traffic.
Analysts believe operators will start to run into bottlenecks if exports rise to 3.5 million to 4 million barrels a day. RBC Capital analysts put the figure lower, around 3.2 million bpd.
The United States has not come close to that yet. A total of the highest loading days across Houston, Port Arthur, Corpus Christi and St. James/New Orleans — the primary places where crude can be exported — comes to about 3.2 million bpd, according to Kpler, a cargo tracking service.
But with total US crude production currently at 9.5 million barrels a day and expected to add 800,000 to 1 million bpd annually, export capacity could be tested before long. Over the past four weeks, exports averaged 1.7 million bpd, more than triple a year earlier.
“Right now, there seems to be a little more wiggle room for export levels,” said Michael Cohen, head of energy markets research at Barclays.
“Two to three years down the road, if US production continues to grow like current levels, the market will eventually signal that more infrastructure is needed. But I don’t think a lot of those plans are in place right now.”
If exports do hit a bottleneck, it would put a ceiling on how much oil shippers get out of the country. Growing domestic oil production and limited export avenues could sink US crude prices.
Shippers have booked vessels to go overseas in recent weeks because the premium for global benchmark Brent crude widened to as much as $7 a barrel over US crude , making exports more profitable for domestic producers.
Export Plans
Exports could hit 4 million bpd by 2022, an Enterprise Products Partners LP executive told an industry event in Singapore recently.
Though some operators are already eyeing expansion plans, there are limitations, said Carlin Conner, chief executive at SemGroup Corp, which owns the Houston Fuel Oil Terminal. SemGroup has three docks for exporting crude and is building additional ones.
“There aren’t very many terminals with the needed pipeline capabilities, tank farm capacity and proper docks to load the ships ... Adding this is expensive and not done easily. So there are limitations to unfettered export access,” he said.
For instance, exports are expected to start from the Louisiana Offshore Oil Port (LOOP) in early 2018 at around one supertanker a month, according to two sources. The LOOP is potentially a key locale for exports. Its location 18 miles (29 km) offshore means it can handle larger vessels than other, shallower ship channels.
While LOOP can load around 40,000 barrels per hour, operating at that capacity is not likely because that same pipe is used to offload imports, the sources added. LOOP did not respond to a request for comment.
In Houston, when looking at the top 30 loading days, crude exports averaged 700,000 bpd, Kpler added. That includes Enterprise’s Houston terminal, among the largest of the export facilities, that had 615,000 bpd.
Other terminal operators are also developing additional facilities. NuStar Energy LP currently can load between 500,000 to 600,000 bpd at its two docks in Corpus Christi, which has about 1 million in capacity, according to a port spokesman. NuStar is developing a third dock, which should come online either late first quarter or early second quarter.
In Houston, Magellan Midstream Partners LP is planning a new 45-foot draft Aframax dock for mid-2018. Aframax vessels can carry about 500,000 to 700,000 barrels of crude.


Infectious diseases are set to become as great a risk for global business as climate change

Updated 19 January 2019
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Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.